Some people are born to be business owners. Maybe it was an idea that came to them during high school or college and they were able to make a life from it. Others are thrust into being business owners through situations such as losing a job and starting their own business to make ends meet. Either way, when the opportunity knocks to start your own business there are five things which you need to know about setting up a company. It does not matter if you are seeking financing from day one or not, you will want to make sure you follow these tips to get your company going on the right foot.
Mike Tyson famously said that ‘everybody has a plan until they get punched in the mouth.' While there is a fair bit of truth in this quote, it is equally true that you need to know what you will do after getting punched. Ok, you probably won't get punched while running your business – at least I hope not. But the reality is that you are bound to face setbacks while trying to grow your business.
As such, the goal of a plan is not to know how everything will work out. Let's face it, if you knew what would happen in the future, you would be busy consulting world leaders. Instead, you have a plan in place to have a good idea of how the market in your area works, and what are the weaknesses of your competition.
In addition, a good plan will help you to map out your pre-launch (also known as go-to-market) strategy. In fact, this article from the Harvard Business Review is a great read for anyone starting their own business. The key takeaway is to think about what your customers want and then address that need. This is what your plan should be about. The rest is execution – basically, get it done better than anyone else.
Maybe this is not your first business, or maybe you were involved in building up another company. I have some news for you. What might have worked in the past is not always guaranteed to work in the future. How is this possible? First, the market has changed. Second, you have changed. Third, you might know what was done to drive the previous company, but do you know why it was done?
You would be surprised how many people were early employees at fast-growing companies, know relatively little about the reasons why certain decisions were made. This is dangerous. Making decisions based on faulty assumptions can have significant consequences. So, don't assume anything. Your experience is useful, but you should understand why things were done the way there done to correctly apply them to your current situation.
Either hire them or borrow money from them. The result is almost always the same. Odds are your friend will never see your company as their company. As such, you should avoid hiring your friends like the plague. Instead, let them become your best customers.
In terms of borrowing money from your friends. This is another no-no. Nothing can strain a relationship more than owing a large amount of money to a close friend. This brings me to my next tip on setting up a company.
Unfortunately, many owners think because they have good personal credit they can rely on that to finance the business until they get sales up. While this is true to a certain extent, you want to start building business credit from the day you set up your business.
This starts by incorporating, opening a bank account, and getting a credit card in the name of your business to name a few. You see businesses tend to be heavy users of credit and if you rely on your personal credit cards and credit lines to finance the business then you are not only risking your credit score, but you could be risking your personal property.
Access to cash is the most important raw material for any small business, so you want to make sure that have set yourself up to succeed. Do this by taking the steps to get your business credit profile on solid footing from day one.
Great, you are making the leap and are starting your own business. One thing that almost every successful entrepreneur has in common is that they embrace their failures. In fact, most successful entrepreneurs had to suffer through multiple setbacks before they made it big. The lesson from this is don't be afraid of failure, learn from what went wrong so you can make it bigger and better the next time.
1) Have a Plan
Mike Tyson famously said that ‘everybody has a plan until they get punched in the mouth.' While there is a fair bit of truth in this quote, it is equally true that you need to know what you will do after getting punched. Ok, you probably won't get punched while running your business – at least I hope not. But the reality is that you are bound to face setbacks while trying to grow your business.
As such, the goal of a plan is not to know how everything will work out. Let's face it, if you knew what would happen in the future, you would be busy consulting world leaders. Instead, you have a plan in place to have a good idea of how the market in your area works, and what are the weaknesses of your competition.
In addition, a good plan will help you to map out your pre-launch (also known as go-to-market) strategy. In fact, this article from the Harvard Business Review is a great read for anyone starting their own business. The key takeaway is to think about what your customers want and then address that need. This is what your plan should be about. The rest is execution – basically, get it done better than anyone else.
2) Don't Assume Anything
Maybe this is not your first business, or maybe you were involved in building up another company. I have some news for you. What might have worked in the past is not always guaranteed to work in the future. How is this possible? First, the market has changed. Second, you have changed. Third, you might know what was done to drive the previous company, but do you know why it was done?
You would be surprised how many people were early employees at fast-growing companies, know relatively little about the reasons why certain decisions were made. This is dangerous. Making decisions based on faulty assumptions can have significant consequences. So, don't assume anything. Your experience is useful, but you should understand why things were done the way there done to correctly apply them to your current situation.
3) The Quickest Ways to Lose Friends
Either hire them or borrow money from them. The result is almost always the same. Odds are your friend will never see your company as their company. As such, you should avoid hiring your friends like the plague. Instead, let them become your best customers.
In terms of borrowing money from your friends. This is another no-no. Nothing can strain a relationship more than owing a large amount of money to a close friend. This brings me to my next tip on setting up a company.
4) Business Credit
Unfortunately, many owners think because they have good personal credit they can rely on that to finance the business until they get sales up. While this is true to a certain extent, you want to start building business credit from the day you set up your business.
This starts by incorporating, opening a bank account, and getting a credit card in the name of your business to name a few. You see businesses tend to be heavy users of credit and if you rely on your personal credit cards and credit lines to finance the business then you are not only risking your credit score, but you could be risking your personal property.
Access to cash is the most important raw material for any small business, so you want to make sure that have set yourself up to succeed. Do this by taking the steps to get your business credit profile on solid footing from day one.
5) Let Go of Your Fear of Failure
Great, you are making the leap and are starting your own business. One thing that almost every successful entrepreneur has in common is that they embrace their failures. In fact, most successful entrepreneurs had to suffer through multiple setbacks before they made it big. The lesson from this is don't be afraid of failure, learn from what went wrong so you can make it bigger and better the next time.
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